THE ROLE OF INSURANCE COMPANIES IN NIGERIA ECONOMIC DEVELOPMENT

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THE ROLE OF INSURANCE COMPANIES IN NIGERIA ECONOMIC DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Insurance has been defined as an economic device where by risk of people and economic enterprises are transformed from in individual to a group in the process the individual pay’s a fee know as the premium to the group for the assumption of risk in the evidence of the contract of risk assumption, the group issues document known as the insurance policy. To the individual the total of the fee paid to the group by the policy holder constitutions the fund or pools from which losses of individual members of the group are paid the group is known as the insurance while the individual is referred to as the insured.

The insurance industry from all indication plays a vital role in Nigeria economic development as well as in the problem of risk management in Nigeria. It is very obvious that the majority of the public who are ignorant of the contributions made by the insurance industry have more faith in the banking or other financial industries. But these people forget the fact that the banking institution acknowledges the fact that the insurance companies contribute significantly to the development of the economy of the nation. And this is why loans collected from them. The establishment of NDIC to help curb the rate of distress bank is another measure to slow that the role of insurance is very vital to economic development. The government had since, also seen the important of the insurance institution in risk management and development. Because of these the government has made some insurance policies compulsory in Nigeria. As can be seen in various insurance. Acts that every or any motor owner must have one of the various insurance covers available in motor insurance in the country. The government had also made it compulsory that all her big building must be insured against fire.

Therefore in this study are going to stress within my scope and unit of the information in my reach the role played by the insurance institution in the economic development of the nation.

1.2 STATEMENT OF THE PROBLEM

THE PROBLEM FACING INSURANCE COMPANIES IN NIGERIA.

Here!? I want to have a general discussion on some problem that hinder to insurance institutions from servicing their aim to economic development. These problems include the following:

SOCIO- ECONOMIC PROBLEM. There are some socio-economic factor which generally affects the attitude of Nigeria toward insurance these factors are religions belief, cultural background low, economic income pretence for ostentations life to thrift and the level of development. As a matter of fact, “some cultures for instance look at life policy as inhuman hence some muslems have manifested strong religion entergenusm to life assurance.

Finally, at our resent level of development there is limited personal prosperity on which insurance could be secured and since most people are living from hand to month” insurance receive less attention. All these lead to the general problem of poor attitude of Nigerians towards insurance.

TECHNICAL PROBLEM

Technical problems in insurance encompass those problems relating to manpower, level of education and poor capital base. If you ask any body who has any idea about insurance he will tell you that the basic problem with the insurance is lack of adequate technically qualified manpower.

Initially. People were not interested in taking up insurance jobs and those who eventually take up the job are poorly educated on the field the situation is worsened by the lack of property coordinated training programme for the staff. Consequently the services of the industry are below expectation due to inadequate made of premium collection. Lack of reliable statistics and poor settlement of claims.

Many people rush into the business of insurance through lack door means without meeting up the capital and other requirements. So when they are struck by hand economic situation, failure becomes theirs.

LEGISLATIVE PROBLEMS

This basically is the restriction imposed on the insurance industry under section 18 of the 1976, insurance decree. The restriction is a problem because as investment is limited only to public companies with paid –up some capital not less then one million naira, the non- quoted public companies are precluded from participating in insurance finding. Since most indigenous Nigeria company are not quieted however as they might stand since some vast multi-million naira companies remain privates their securities are outside the scope to be patronized by insurance venture capital. Since the number of quoted companies is still very small, this limit to the scope of insurance investment is a constraint on option investment decision and potentially reduce income and grant in the industry by reducing the outlook for insurance find to attain maximum value.

1.3 PURPOSE /OBJECTIVE OF THE STUDY

There are many objective of insurance it includes:

I. Primary, it guarantee that the insured will be indemnified (compensated) in the event of insured risk happening

II. The world economic system would obvious grind to a half if there had not been an institution like insurance closely follows trade and commerce giving helping hand in times of distress.

III. Investment of insurance companies helps to finance new project and thereby greater employment opportunities for job seekers and also increase national wealth.

1.4 SIGNIFICANCE OF THE STUDY

NEED TO INVOLVE INSURANCE IN NATIONAL DEVELOPMENT PROGRAMMES

This country belongs to us all and we have to sit down to salvage. It together in a common slogon by the former head of the state general ……………………….. (RTD) but how can one salvage the economy of a place where he dose not know how policies that directly affect him are received at dictatorship is the bone of human initiative. The insurance companies very frequently are not involved when important economic discussions are being undertaken by the government. The industry therefore dose not fulfill its role in economic development. Because they do not partake in government decision particularly to say areas they could fit in well.

Therefore, i am suggesting that the insurance industry, through the Nigeria insurance association (NIA) be involved in national development plans. This will obvious put the national level of development on higher scale.

1.5 THE DEFINITION OF TERMS

Insurance is defined as a safe guard against risk. Any device aimed at reducing the chances of a risk occurring, when it happens, reducing, the extent of its damage and providing the affected persons with compensation is a from of insurance.

Insurance as a modern concept for solving risk related problems depends on cooperation of a longer number of people for its success this is the basic fundamental of insurance.

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